Fannie Mae Raises Lending Criteria

[Slim Shavings]

IS this part of the Holdup for some


The government-backed mortgage financier Fannie Mae is tightening its lending standards. The GSE says it will require a credit score of at least 620 for all mortgage loans delivered in accordance with its Selling Guidelines, including loans guaranteed or insured by a federal government agency, such as the Federal Housing Administration (FHA), Veterans Affairs (VA), or HUD.
The new minimum will take effect for manually underwritten loans and all government loans on November 1, and for loans underwritten using Fannie’s Desktop Underwriter, when the software is updated on December 12. Currently, the minimum score for most loan types is 580, with no minimum for government loans.
Exceptions to the new minimum credit score requirement are limited to mortgage loans that are manually underwritten with nontraditional credit and those originated in accordance with the GSE’s Refi Plus offerings,

which are being used to help underwater borrowers refinance under the Obama administration’s Making Home Affordable program.
In a notice issued to lenders, Fannie Mae said raising the minimum credit score will support “prudent risk management and better ensure sustainable homeownership.”
Brian Faith, a spokesman for Fannie Mae, told American Banker, “Our experience with recently delivered loans with credit scores below 620 is that they reached a level of serious delinquency at a rate approximately nine times higher than other acquisitions during the same period.”
The federal government has leaned heavily on Fannie Mae and its sibling firm Freddie Mac to help ease the credit crunch, but it’s a sticky tug-of-war between thawing the credit freeze and adhering to stricter underwriting standards. Even federal regulators have admitted that they’re now asking lenders to walk a fine line.
Sheila Bair, FDIC chairman, recently said in an interview with Steve Forbes for Intelligent Investing, “…we try to emphasize to our banks to strike the appropriate balance. Obviously, we want prudent lending. We want loans that the people will pay. But we do want lending.”
When asked by Forbes if credit lines were easing, Bair added, “..the trick, of course, is not to recoil so much, go too far the other way and just pull back on credit even when it’s a good loan and the borrower’s fully capable of repaying it….we don’t want the lax lending of the past but we do want them to lend


Fannie Mae Raises Lending Criteria

[ama125]

I think this would only apply to NEW loans and not existing ones seeking modification. I could be wrong, wouldn't be the first time

[nativelasvegan]

It appears Fannie's people did not read the study done by Experian and Wyman about who is more likely to walk away from a mortgage. Why doesn't this surprise me?

Homeowners who 'strategically default' on loans a growing problem -- latimes.com

[ama125]

Originally Posted by nativelasvegan

It appears Fannie's people did not read the study done by Experian and Wyman about who is more likely to walk away from a mortgage. Why doesn't this surprise me?

Homeowners who 'strategically default' on loans a growing problem -- latimes.com

I read that article before. Guess they haven't! I know I fall into that category...I had a great credit score when I took out my loans, just didn't have the 20% to put down. And nothing I've done was "strategic", just could not afford to make the payments anymore.

[ama125]

And I should add that despite the fact that my home has lost value, I have not chosen to walk away. I'm trying to keep it and work with them. You'd think they'd be happy to take on a paying customer at any price especially since it will be harder to generate revenue with their new lending standards. Perhaps this will be a good thing for those of us trying for a mod.